Conference Call with Accompanying Slide
Presentation Scheduled Today at 4:30 PM
ET
RESEARCH TRIANGLE PARK, N.C.,
Nov. 9, 2023 /PRNewswire/ -- Charles
& Colvard, Ltd. (Nasdaq: CTHR) (the "Company"), a globally
recognized fine jewelry company that specializes in moissanite and
lab grown diamonds, reported financial results for the first
quarter ended September 30, 2023
("First Quarter Fiscal 2024").
Management Commentary
"While we experienced continued softness in the first quarter,
we remain optimistic that our strategic initiatives will help us to
overcome weakened consumer spending amidst a challenging economy.
Despite industry challenges, we believe we have the product
portfolio to meet and exceed customer demands during the upcoming
holiday season. We remain focused on reaching broader audiences and
capturing greater market share as our investments in technology
begin to drive revenue," said Don
O'Connell, President and CEO of the Company.
"We are excited and encouraged by the growth opportunities of
our shoppable streaming initiative, which we believe will have an
important impact on our market positioning and brand awareness. Our
in-house technology enables us to reach a wider audience and engage
with our customers in innovative ways. We believe there is
potential for future revenue growth as we leverage this medium to
educate consumers and showcase our Forever OneTM
moissanite and Caydia® lab grown diamond product brands
in authentic and relatable ways. Additionally, our ability to
repurpose long-form content on different channels allows us to
maximize the reach and affordability of our marketing strategies,"
concluded O'Connell.
Recent Corporate Highlights
- Expanded assortment of new Forever OneTM moissanite
and Caydia® lab grown diamond fine jewelry styles on
charlesandcolvard.com across all categories, including bridal and
anniversary styles in both moissanite and lab grown diamond;
Couture Collection in lab grown diamond; Made in Color collection
in lab grown diamond; fashion jewelry assortment in both moissanite
and lab grown diamond; and men's fine jewelry in lab grown
diamond;
- Expanded new Forever One™ moissanite styles in Helzberg
Diamonds brick-and-mortar stores and helzberg.com;
- Introduced Caydia® lab grown diamond men's fine
jewelry styles in select Helzberg Diamond brick-and-mortar stores
and helzberg.com;
- Featured in The Scout Guide of Raleigh, Durham, & Chapel Hill
showcasing the Company's Signature Showroom; and
- Appeared in thirty brand and product placements and features,
including notable outlets such as Today, Glamour,
Brides, The Knot, and Bridal Guide.
Financial Summary for First Quarter Fiscal 2024
(Quarter Ended September 30, 2023
Compared to Quarter Ended September 30,
2022)
- Net sales of $5.0 million for the
quarter, a decrease of 33% from $7.4
million in the year-ago quarter.
- In the Online Channels segment, which consists of e-commerce
outlets including charlesandcolvard.com, moissaniteoutlet.com,
charlesandcolvarddirect.com, third-party online marketplaces,
drop-ship retail and other pure-play e-commerce outlets, net sales
of $3.9 million, a decrease of 19%
from the year-ago quarter, representing 79% of total net sales for
the quarter, compared to $4.9
million, or 66% of total net sales in the year-ago
quarter.
- In the Traditional segment, which consists of wholesale and
brick-and-mortar customers, net sales of $1.0 million, a decrease of 59% from the year-ago
quarter, representing 21% of total net sales for the quarter,
compared to $2.5 million, or 34% of
total net sales, in the year-ago quarter.
- Finished jewelry net sales of $4.3
million, a decrease of 22% for the quarter, compared to
$5.5 million in the year-ago
quarter.
- Loose jewel net sales decreased 64% to $0.7 million for the quarter, compared to
$1.8 million in the year-ago
quarter.
- Gross profit was $1.9 million, or
a gross margin of 39% for the quarter, compared to gross profit of
$3.3 million, or gross margin of 45%
in the year-ago quarter.
- Operating expenses increased 1% to $4.6
million for the quarter, compared to $4.5 million in the year-ago quarter.
- Net loss was $2.5 million, or
$0.08 loss per diluted share for the
quarter, compared to net loss of $0.9
million, or $0.03 loss per
diluted share, in the year-ago quarter.
- Weighted average diluted shares outstanding were 30.4 million
for the quarter, consistent with the year-ago quarter.
Financial Position
Cash, cash equivalents and restricted cash totaled $12.7 million as of September 30, 2023, compared to $15.6 million as of June
30, 2023, representing a decrease of $2.9 million. Total inventory increased to
$27.3 million as of September 30, 2023, up from $26.8 million as of June
30, 2023, but down from $36.6
million as of September 30,
2022. The Company had no debt outstanding as of September 30, 2023.
Investor Conference Call
Charles & Colvard will host an investor conference call and
webcast presentation to discuss its financial results for the
quarter ended September 30, 2023 at
4:30 p.m. ET on Thursday, November 9,
2023.
Live Call-In Information: Interested parties can access
the conference call by dialing (844) 875-6912 (U.S. toll-free) or
(412) 317-6708 (international) and asking to be joined into the
Charles & Colvard call.
Live Webcast Information: Interested parties can access
the conference call and accompanying presentation slides via a live
webcast, which is available in the Investor Relations section of
the Company's website at https://ir.charlesandcolvard.com/events or
https://www.webcaster4.com/Webcast/Page/346/49381.
A replay of this conference call will be available until
November 16, 2023 at (877) 344-7529
(U.S. toll-free) or (412) 317-0088 (international). The replay
conference code is 9938382. A webcast replay will be available in
the Investor Relations section of the Company's website at
https://ir.charlesandcolvard.com/events.
About Charles & Colvard, Ltd.
Charles & Colvard, Ltd. (Nasdaq: CTHR) believes that fine
jewelry should be as ethical as it is exquisite. Charles &
Colvard is the original creator of lab grown moissanite (a rare
gemstone formed from silicon carbide). The Company brings
revolutionary gems and fine jewelry to market by using exclusively
Made, not MinedTM above ground gemstones and a
dedication to 100% recycled precious metals. Their Forever One™
moissanite and Caydia® lab grown diamond brands provide
exceptional quality, incredible value and a conscious approach to
bridal, high fashion, and everyday jewelry. Charles & Colvard
was founded in 1995 and is based in North
Carolina's Research Triangle
Park region. For more information, please visit
www.charlesandcolvard.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Statements expressing expectations regarding our future
and projections relating to our products, sales, revenues, and
earnings are typical of such statements and are made under the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to,
statements about our plans, objectives, representations, and
contentions and are not historical facts and typically are
identified by use of terms such as "may," "will," "should,"
"could," "expect," "intend," "plan," "anticipate," "believe,"
"estimate," "predict," "continue," and similar words, although some
forward-looking statements are expressed differently.
All forward-looking statements are subject to the risks and
uncertainties inherent in predicting the future. You should be
aware that although the forward-looking statements included herein
represent management's current judgment and expectations, our
actual results may differ materially from those projected, stated,
or implied in these forward-looking statements as a result of many
factors including, but not limited to, (1) our business and our
results of operations could be materially adversely affected as a
result of general economic and market conditions; (2) our future
financial performance depends upon increased consumer acceptance,
growth of sales of our products, and operational execution of our
strategic initiatives; (3) we face intense competition in the
worldwide gemstone and jewelry industry; (4) we have historically
been dependent on a single supplier for substantially all of our
silicon carbide, or SiC, crystals, the raw materials we use to
produce moissanite jewels; if our supply of high-quality SiC
crystals is interrupted, our business may be materially harmed; (5)
constantly evolving privacy regulatory regimes are creating new
legal compliance challenges; (6) our information technology, or IT,
infrastructure, and our network has been and may be impacted by a
cyber-attack or other security incident as a result of the rise of
cybersecurity events; (7) we are subject to certain risks due to
our international operations, distribution channels and vendors;
(8) our business and our results of operations could be materially
adversely affected as a result of our inability to fulfill orders
on a timely basis; (9) we are currently dependent on a limited
number of distributor and retail partners in our Traditional
segment for the sale of our products; (10) we may experience
quality control challenges from time to time that can result in
lost revenue and harm to our brands and reputation; (11) the
effects of COVID-19 and other potential future public health
crises, epidemics, pandemics or similar events on our business,
operating results, and cash flows are uncertain; (12) seasonality
of our business may adversely affect our net sales and operating
income; (13) our operations could be disrupted by natural
disasters; (14) sales of moissanite and lab grown diamond jewelry
could be dependent upon the pricing of precious metals, which is
beyond our control; (15) our current customers may potentially
perceive us as a competitor in the finished jewelry business; (16)
if the e-commerce opportunity changes dramatically or if e-commerce
technology or providers change their models, our results of
operations may be adversely affected; (17) governmental regulation
and oversight might adversely impact our operations; (18) the
execution of our business plans could significantly impact our
liquidity; (19) we are subject to arbitration, litigation and
demands, which could result in significant liability and costs, and
impact our resources and reputation; (20) the financial
difficulties or insolvency of one or more of our major customers or
their lack of willingness and ability to market our products could
adversely affect results; (21) negative or inaccurate information
on social media could adversely impact our brand and reputation;
(22) we rely on assumptions, estimates, and data to calculate
certain of our key metrics and real or perceived inaccuracies in
such metrics may harm our reputation and negatively affect our
business; (23) we may not be able to adequately protect our
intellectual property, which could harm the value of our products
and brands and adversely affect our business;
(24) environmental, social, and governance matters may impact
our business, reputation, financial condition, and results of
operations; (25) if we fail to evaluate, implement, and
integrate strategic acquisition or disposition opportunities
successfully, our business may suffer; (26) our failure to maintain
compliance with The Nasdaq Stock Market's continued listing
requirements could result in the delisting of our common stock;
(27) some anti-takeover provisions of our charter documents may
delay or prevent a takeover of our Company; and (28) we cannot
guarantee that our share repurchase program will be
utilized to the full value approved, or that it will enhance
long-term stockholder value and repurchases we consummate could
increase the volatility of the price of our common stock and could
have a negative impact on our available cash balance, in addition
to the other risks and uncertainties described in more detail in
our filings with the U.S. Securities and Exchange Commission (the
"SEC"), including our Annual Report on Form 10-K for the fiscal
year ended June 30, 2023 and
subsequent reports filed with the SEC. Forward-looking statements
speak only as of the date they are made. We undertake no obligation
to update or revise such statements to reflect new circumstances or
unanticipated events as they occur except as required by the
federal securities laws, and you are urged to review and consider
disclosures that we make in the reports that we file with the
Securities and Exchange Commission, or SEC, that discuss other
factors relevant to our business.
- Financial Tables Follow –
CHARLES &
COLVARD, LTD.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
2023
|
|
|
2022
|
|
Net sales
|
|
$
|
4,953,023
|
|
|
$
|
7,374,083
|
|
Cost of goods
sold
|
|
|
3,008,507
|
|
|
|
4,086,010
|
|
Gross profit
|
|
|
1,944,516
|
|
|
|
3,288,073
|
|
Operating
expenses:
Sales and
marketing
|
|
|
2,721,965
|
|
|
|
3,107,946
|
|
General and
administrative
|
|
|
1,854,268
|
|
|
|
1,413,476
|
|
Total costs and expenses
|
|
|
4,576,233
|
|
|
|
4,521,422
|
|
Loss from
operations
|
|
|
(2,631,717)
|
|
|
|
(1,233,349)
|
|
Other
income:
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
92,260
|
|
|
|
40,201
|
|
Total other income
|
|
|
92,260
|
|
|
|
40,201
|
|
Loss before income
taxes
|
|
|
(2,539,457)
|
|
|
|
(1,193,148)
|
|
Income tax
benefit
|
|
|
-
|
|
|
|
(302,956)
|
|
Net loss
|
|
$
|
(2,539,457)
|
|
|
$
|
(890,192)
|
|
|
|
|
|
|
|
|
|
|
Net loss per common
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.08)
|
|
|
$
|
(0.03)
|
|
Diluted
|
|
$
|
(0.08)
|
|
|
$
|
(0.03)
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares used in computing net loss per
common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
30,444,954
|
|
|
|
30,433,195
|
|
Diluted
|
|
|
30,444,954
|
|
|
|
30,433,195
|
|
CHARLES &
COLVARD, LTD.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
September 30,
2023
(unaudited)
|
|
|
June 30,
2023
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ 7,592,698
|
|
|
|
$
10,446,532
|
|
Restricted cash
|
|
5,079,322
|
|
|
|
5,122,379
|
|
Accounts receivable,
net
|
|
442,693
|
|
|
|
380,085
|
|
Inventory, net
|
|
8,263,043
|
|
|
|
7,476,046
|
|
Note receivable
|
|
250,000
|
|
|
|
250,000
|
|
Prepaid expenses and other
assets
|
|
969,440
|
|
|
|
901,354
|
|
Total current assets
|
|
22,597,196
|
|
|
|
24,576,396
|
|
Long-term
assets:
|
|
|
|
|
|
|
|
Inventory, net
|
|
19,066,682
|
|
|
|
19,277,530
|
|
Property and equipment,
net
|
|
2,534,713
|
|
|
|
2,491,569
|
|
Intangible assets,
net
|
|
315,776
|
|
|
|
305,703
|
|
Operating lease right-of-use
assets
|
|
2,028,736
|
|
|
|
2,183,232
|
|
Other assets
|
|
49,658
|
|
|
|
49,658
|
|
Total long-term assets
|
|
23,995,565
|
|
|
|
24,307,692
|
|
TOTAL ASSETS
|
|
$
46,592,761
|
|
|
|
$
48,884,088
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ 5,652,218
|
|
|
|
$
4,786,155
|
|
Operating lease liabilities,
current portion
|
|
886,117
|
|
|
|
880,126
|
|
Accrued expenses and other
liabilities
|
|
925,385
|
|
|
|
1,395,479
|
|
Total current liabilities
|
|
7,463,720
|
|
|
|
7,061,760
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
Noncurrent operating lease
liabilities
|
|
1,842,468
|
|
|
|
2,047,742
|
|
Total long-term liabilities
|
|
1,842,468
|
|
|
|
2,047,742
|
|
Total liabilities
|
|
9,306,188
|
|
|
|
9,109,502
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
Common stock, no par
value; 50,000,000 shares
authorized; 30,912,108 shares issued and 30,523,705
shares outstanding at September 30, 2023 and
30,912,108 shares issued and 30,523,705 shares
outstanding at June 30, 2023
|
|
57,242,211
|
|
|
|
57,242,211
|
|
Additional paid-in
capital
|
|
26,257,363
|
|
|
|
26,205,919
|
|
Treasury stock, at
cost, 388,403 shares at both September
30, 2023 and June 30, 2023
|
|
(489,979)
|
|
|
|
(489,979)
|
|
Accumulated
deficit
|
|
(45,723,022)
|
|
|
|
(43,183,565)
|
|
Total shareholders' equity
|
|
37,286,573
|
|
|
|
39,774,586
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
$
46,592,761
|
|
|
|
$
48,884,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHARLES &
COLVARD, LTD.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
Three Months Ended
September
30,
|
|
|
|
2023
|
|
2022
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net loss
|
$
|
(2,539,457)
|
|
$
|
(890,192)
|
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
178,291
|
|
|
137,711
|
|
|
Stock-based
compensation
|
|
51,444
|
|
|
96,232
|
|
|
Provision for
uncollectible accounts
|
|
79,000
|
|
|
-
|
|
|
Recovery of sales
returns
|
|
(81,000)
|
|
|
(36,000)
|
|
|
Inventory
write-downs
|
|
-
|
|
|
119,000
|
|
|
Provision for accounts
receivable discounts
|
|
9,996
|
|
|
3,250
|
|
|
Deferred income
taxes
|
|
-
|
|
|
(302,956)
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(70,604)
|
|
|
695,165
|
|
|
Inventory
|
|
(576,149)
|
|
|
(3,174,668)
|
|
|
Prepaid expenses and
other assets, net
|
|
86,410
|
|
|
(36,616)
|
|
|
Accounts
payable
|
|
866,063
|
|
|
316,819
|
|
|
Accrued expenses and
other liabilities
|
|
(669,377)
|
|
|
(598,883)
|
|
|
Net cash used in
operating activities
|
|
(2,665,383)
|
|
|
(3,671,138)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
|
(217,052)
|
|
|
(430,400)
|
|
|
Payments for intangible
assets
|
|
(14,456)
|
|
|
(2,214)
|
|
|
Net cash used in investing activities
|
|
(231,508)
|
|
|
(432,614)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Repurchases of common
stock
|
|
-
|
|
|
(451,815)
|
|
|
Net cash used in financing activities
|
|
-
|
|
|
(451,815)
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH,
CASH EQUIVALENTS, AND RESTRICTED CASH
|
|
(2,896,891)
|
|
|
(4,555,567)
|
|
|
CASH, CASH EQUIVALENTS,
AND RESTRICTED CASH, BEGINNING OF
PERIOD
|
|
15,568,911
|
|
|
21,179,340
|
|
|
CASH, CASH EQUIVALENTS,
AND RESTRICTED CASH, END OF PERIOD
|
$
|
12,672,020
|
|
$
|
16,623,773
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information:
|
|
|
|
|
|
|
|
Cash paid during the
period for income taxes
|
$
|
-
|
|
$
|
5,900
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Condensed Consolidated Balance Sheets:
|
September
30,
2023
|
|
June
30,
2023
|
|
|
Cash and cash
equivalents
|
$
|
7,592,698
|
|
$
|
10,446,532
|
|
|
Restricted
cash
|
|
5,079,322
|
|
|
5,122,379
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
$
|
12,672,020
|
|
$
|
15,568,911
|
|
|
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SOURCE Charles & Colvard, Ltd.